Shopping Mall Giant Buys Rouse Co. For $7.2 Billion

General Growth Properties' Purchase Is The Largest Ever Of A Real Estate Investment Trust.

August 21, 2004|By Danielle Kost, Bloomberg News

General Growth Properties Inc., the second-largest U.S. owner of shopping malls, agreed to buy Rouse Co. for about $7.2 billion in cash to add properties such as Boston's Faneuil Hall Marketplace.

Shareholders will receive $67.50 a share, a 33 percent premium over Thursday's closing price, Chicago-based General Growth said. The company also will assume about $5.4 billion of debt, in what will be the largest purchase ever of a real estate investment trust.

Rouse, founded in 1939 to sell federal mortgages, owns or has interests in 37 malls, four community centers and six mixed-use projects with about 40 million square feet of space. In the Orlando area, it owns Oviedo Marketplace.

General Growth chief executive John Bucksbaum has spent about $1.5 billion on acquisitions this year, making the company the owner or manager of 154 million square feet of retail space.

"It winds up getting them into both premier malls, which have great occupancy rates and great tenants, but it also gets them into new areas of business as their other malls have matured," said Burt Flickinger, managing director of retail consulting firm Strategic Resource Group in New York.

General Growth owns West Oaks Mall and Altamonte Mall in the Orlando area.

Rouse began developing some of the best-known commercial properties and planned communities in the United States during the 1950s, including New York's South Street Seaport and Harborplace in Baltimore.

Columbia, Md., where the company is based, was the company's first planned community and one of the first in the United States to combine residential, commercial and industrial uses.

Shares of General Growth fell $1.54, or 4.9 percent, to $30 each on the New York Stock Exchange. Rouse gained $16.04, or 32 percent, to close at $66.65 each.

Sales at the Rouse retail properties average about $439 per square foot and the occupancy rate is about 92 percent.

In 2003, General Growth had sales of about $345 per square foot across its portfolio, in line with the average sales of 1,200 regional malls surveyed by the International Council of Shopping Centers.

Simon Property Group Inc., which controls 192 million square feet of space, is the largest U.S. owner of shopping centers.